One of the most common ways to present a cash flow statement is through the Excel method. It is the most common because it is so easy for a computer to create an Excel workbook and send it out to thousands of business owners. However, you have to be very careful in using the Excel flow chart that you use. Here is an indirect way to explain what the flow looks like.
First of all, an Excel cash flow statement can be created for any business. For example, automobile dealers will create a worksheet with sales for each month. Then they will label the cells A-L so that it is easier to identify which month the income or profit came from. This can be done by creating separate worksheets for every month in the year.
The third thing to do is to write the following into the body of the worksheet: Month Number, Sales Amount, Average Revenue per Month, and Total Revenue Paid during this Month. Note that the months should be ordered (monthly order) starting with January. You can also add in the item code for the month you are tracking so that the income can be coded for that month. Next is the column where you put the code for the item or line item you are tracking. You may include the cost associated with that item in there, such as the price of the vehicle or labor for putting it together. Be sure to put this into the appropriate cell for that particular line item.
The next thing to do is to create a line for the beginning of each month. You may do this by labeling the cells A-G. Then you will type the start date and end date so that you can create a nice simple line for your cash flow. The next thing you need to do is to write the code that tells Excel how many units were sold during the month. This code needs to be in cell F2. This cell should have the Text box checked so that you can get the exact amount of sales for that month.
After you have written the line, click on the button called Save button. You should now see the line freeze when you click it. Then you will have to click on the red “x” below that line. This will hide the original line until you next restore it. Be sure to click the “x” so that you don’t lose any data on the original sales numbers.
The last thing you will need to do is to write the code to determine the sales amount of the period just finished. In this formula, you simply need to multiply the total number of units sold during that period by the average price per unit during that period. This should be easy to remember since you already wrote it down on the original sheet. Then you will need to copy this formula into the second sheet. Be sure to change the type of sheet to be used.
That’s all you will need to do in Excel to perform a cash flow analysis using the Direct Method. However, this method has many advantages over the traditional method. The first advantage is that you can easily run multiple cash flow reports at once. By running your reports in Excel, you will be able to create reports that show the sales total, average price per unit, and a breakdown by category.
Another great advantage of using the Direct method in Excel is that it can help you predict how much money you will have in your bank account after the month ends. This is done by creating a rolling average. The formula for doing this is: Assuming constant growth, monthly sales equal to x, and if growth is not constant, calculate the net effect. This gives you a pretty good picture of how much money you will have in your bank by the end of the month. This may seem like complex mathematics, but anyone can use this concept to create a solid financial forecast using cash flow reports in Excel.
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